The Section includes periodically sends email with New Case Alerts to its members. Recent New Case Alerts are listed below. Most cases can be found on the California Courts website. Please note: Opinions more than 120 days old can be found through the process described HERE.
Cite as G055377
Filed May 29, 2018, Fourth District, Div. Three
By Matthew R. Owens
Withers Bergman LLP
Beverly amended and restated her trust in 2013, naming herself as initial trustee and her son Thomas as her successor. In 2014, Beverly died and Thomas succeeded her as trustee. Beverly’s daughter, Nancy, filed petitions seeking, among other things, to invalidate the trust and to remove Thomas as trustee. After Thomas filed an inadequate accounting, the probate court suspended him and ordered him to turn over all trust records to the interim co-trustees. Although the court order was broad enough to include attorney-client communications between Thomas and his counsel, Thomas refused to produce those communications because a provision in the trust permitted the trustee to withhold privileged communications from a successor trustee. Thomas petitioned for a writ of mandate to reverse the trial court’s order.
The appellate court denied the petition. Under Moeller v. Superior Court, when a trustee seeks legal advice on behalf of a trust, the privilege vests in the office of trustee and the right to assert the privilege passes to the successor trustee. A trust may not allow a former trustee to withhold from a successor trustee communications exchanged between the former trustee and the former trustee’s counsel, and any trust provision seeking to do so violates public policy and is unenforceable. A trust may limit a trustee’s liability to some extent, but not in cases of intentional misconduct, gross negligence, or acts taken in bad faith or with reckless indifference to the interests of the trust’s beneficiaries. Since a trust cannot absolve a trustee of all liability, it also cannot prevent disclosure of the records that may be used to establish liability. In order to protect attorney-client communications, a trustee must retain separate counsel to distinguish personal advice from advice obtained in a fiduciary capacity. Thomas did not retain separate counsel for that purpose and therefore had to produce all trust records to his successor.
Cite as D072298
Filed April 27, 2018, Fourth District, Div. One
By Daniel C. Kim
Weintraub Tobin Chediak Coleman Grodin Law Corporation
Decedent Norman Casserley and Paul Blazevich were neighbors. In 1997, Decedent was convicted of a crime and ordered to pay Blazevich restitution. Ten years later, Blazevich recorded the order and then obtained an amended order which increased the restitution award. In 2008, Blazevich executed and recorded an assignment of the original (but not the amended) order to his wife Emerita Cruz Joya. The amended order was not recorded until after Casserley’s death in 2015. Casserley died intestate, and the estate’s only asset was a modest house, which the administrator sold. The estate was insufficient to pay all claims. Joya filed a creditor’s claim based on the initial order, which was allowed and paid, and an amended claim based on the amended order, which the administrator denied. Joya objected to the administrator’s final accounting, arguing that the post-death recordation of the amended order created a lien on all probate assets. She also argued that, under the Constitution’s restitution provision, her claim to payment of restitution was entitled to priority over other creditors’ claims filed by the state and county. The trial court rejected both arguments.
The appellate court affirmed both rulings. The recordation of an abstract of judgment after the debtor’s death does not create a lien on the debtor’s estate property and, therefore, the recordation of the amended order did not create a lien on estate assets because it was recorded after Casserley’s death. Second, the appellate court evaluated the legislative history of the Constitution’s restitution provision and pertinent statutory schemes and found that the administrator’s sale of the decedent’s house did not constitute “collection of money” for purposes of the Constitution’s restitution provision. Therefore, Joya’s claim did not have priority over other claims.
Cite as 22 Cal.App. 5th 92
Filed April 10, 2018, Second District, Div. One
On August 21, 2015, Gordon B., a 75-year-old disabled veteran, obtained an elder abuse restraining order against his neighbor, Sergio Gomez, based on various acts of misconduct including destruction of personal property, verbal abuse, obscene gestures, attempts to run over Gordon B. with a pickup truck, and setting off large fireworks on Gordon B.’s driveway. The order followed an evidentiary hearing and was effective for one year. Prior to its expiration, Gordon B. filed a request to renew the restraining order based on concerns that the abuse would resume once the order was terminated. He cited to two incidents in which Gomez had arguably violated the restraining order. The trial court denied the request finding that Gordon B.’s concerns were too speculative and that he had insufficient evidence for a renewal.
The appellate court reversed and remanded for further proceedings. Under the proper standard, the party requesting renewal need only show by a preponderance of the evidence that the protected party has a reasonable apprehension of future abuse if the order is not renewed. This means that the evidence must demonstrate it is more probable than not there is a sufficient risk of future abuse to find the protected party’s apprehension is genuine and reasonable. The trial court erred in requiring evidence of further abuse since the initial order, which is expressly not required under the applicable statutes.
21 Cal.App.5th 1163
Filed March 29, 2018
California Court of Appeal, Second District, Div. 6
By Golnaz Yazdchi
Sheppard Mullin Richter & Gampton LLP
P.D. suffered from schizophrenia, and the Public Guardian sought an LPS conservatorship on the ground that P.D. was gravely disabled as a result of a mental disorder. The trial court gave the jury two special instructions concerning the possible consequences of an LPS conservatorship. In the first special instruction, the trial court explained that an LPS conservator would have the right to require the conservatee to obtain medical treatment, to place the conservatee in a facility, and to receive and expend funds for the conservatee. In the second special instruction, the trial court provided information concerning the duration of the LPS conservatorship. The jury found beyond a reasonable doubt that P.D. was gravely disabled as a result of a mental disorder. P.D. appealed, arguing that the special instructions confused the jury as to what matters it could consider in determining whether or not P.D. was gravely disabled, which violated P.D.’s due process rights.
The Court of Appeal affirmed. The trial court erred when it instructed the jury about the duration and types of treatment that may be ordered by an LPS conservator, but the error was harmless. Although LPS proceedings are subject to the due process clause because significant civil liberties are at stake, they are nevertheless civil proceedings. Therefore, the rule in criminal cases that any jury instruction about the consequences of a guilty verdict is a violation of due process is not equally applicable to LPS proceedings. Here, the evidence in support of the jury’s finding was overwhelming, so although the special instructions were irrelevant to the jury’s task, they made no difference to the outcome.
20 Cal.App.5th 1132
Filed March 1, 2018
California Court of Appeal, First District, Div. 1
By Golnaz Yazdchi
Sheppard Mullin Richter & Hampton LLP
In prior probate proceedings plaintiff Norman Bartsch Herterich made a claim to his father Hans Bartsch’s entire estate as an omitted child on the basis that Bartsch either did not believe, or forgot, that he had a child when he executed his will. The probate court granted summary judgment against plaintiff, and concluded that substantial evidence showed that Bartsch was aware of plaintiff’s existence when he executed his will. The Court of Appeal affirmed. Plaintiff then sued defendants Arndt Peltner, the executor, and Alice Brown Traeg, the executor’s attorney, for intentional fraudulent misrepresentation, negligent misrepresentation, and fraudulent concealment. Plaintiff alleged that defendants deprived plaintiff of the opportunity to object to the probate petition because when defendants initially filed the probate petition they stated under penalty of perjury that the decedent had no children. As a result, plaintiff alleged that he was led to believe that Bartsch (his father) was not aware that he had a son, or had forgotten it, which caused plaintiff to incur significant legal fees in bringing his claim against the estate. Plaintiff alleged damages because the court relied on defendants’ alleged misrepresentations in rendering rulings adverse to plaintiff. The court granted defendants’ motion for summary judgment on the basis that plaintiff had suffered no damages from defendants’ actions because he had no beneficial interest in the estate.
The Court of Appeal affirmed, but on the basis of the litigation privilege. The Court held that even fraudulent statements made by defendants in the course of the probate proceedings were protected by the privilege when the communications occurred in the context of a judicial proceeding. The Court reasoned that the personal representative of an estate does not waive the litigation privilege by taking an oath of truthfulness under the Probate Code, and that courts have held that the litigation privilege applies to statements made in furtherance of litigation in probate matters even when the relevant communication involves fraudulent statements, forgery, or falsification of documents.
Cite as B280003
Filed December 21, 2017
California Court of Appeal, Second District, Div. 5
By Golnaz Yazdchi
Sheppard Mullin Richter & Hampton LLP
Francine S. Yeh and her husband, Shu Hsun Tai, purchased a condominium as joint tenants. To obtain a better interest rate on the loan, Francine signed a quitclaim deed to transfer the condominium to Shu’s name. Shu promised Francine that he would put her name back on the title to the property. Francine and Shu remained married until Shu’s death. Three days before Shu died, Shu told Francine that the property was all hers. After Shu’s death, Francine learned that Shu had transferred the condominium to a trust he established during their marriage without Francine’s knowledge, naming his children from a prior marriage as beneficiaries. About 18 months after Shu’s death, Francine filed an action alleging that Shu breached his fiduciary duties to Francine during the marriage, and sought an order to void the deed transferring the condominium to the trust, directing the beneficiaries of Shu’s trust to convey the property to Francine, and for attorney’s fees. The trial court sustained the beneficiaries’ demurrer without leave to amend on the grounds that Francine’s claims were time barred because they were brought more than a year after Shu’s passing.
The Court of Appeal reversed. It held that when a spouse brings a breach of fiduciary duty claim against a deceased spouse under Family Code section 1101, the limitations period provided in Code of Civil Procedure sections 366.2 and 366.3 do not apply. The limitations period provided under Family Code section 1101, subdivision (d) applies instead. It provides in pertinent part that an action be commenced within three years of the date a petitioning spouse had actual knowledge that the transaction or event occurred, and further, that an action may be commenced on the death of a spouse without regard to the three-year time limit. Acknowledging the conflict between the Family Code and the Code of Civil Procedure, the court reasoned that when two statutes of limitations are applicable, the specific statute takes precedence over the general statute. Because Francine brought her claim under the Family Code, its statute of limitations applied.
Cite as C074846
Filed November 28, 2017, Third District
Barbara executed a health care power of attorney, naming her niece, Robin, as agent with authority to make health care decisions, including the power to authorize admission to health care facilities. Four years later, Barbara executed a personal care power of attorney, naming her sister, Jean, and Robin as agents for personal matters and litigation. The personal care power of attorney expressly excluded health care decisions. Jean admitted Barbara to a residential care facility and signed an admission agreement containing an arbitration clause. When Barbara died after choking on her lunch at the facility, both Jean and Robin sued the facility for elder abuse and other claims. The facility moved to compel arbitration under the admission agreement. The trial court denied the motion because Jean lacked authority to admit Barbara to the facility under the personal care power of attorney.
The appellate court affirmed. The facility was a health care institution authorized by law to provide health care. The facility provided health care to Barbara by, among other things, providing dementia care -- a higher level of care that required specialized training of the facility staff. A health care decision, if made pursuant to a power of attorney, must be made under a health care power of attorney. The facility had a copy of Barbara’s health care power of attorney naming Robin as agent, and was therefore obligated to seek Robin’s consent to the arbitration clause before relying on any authority Jean may have had. Since Jean lacked authority to execute the admission agreement, the agreement and its arbitration clause were void.
Cite as D071155
Filed November 30, 2017, Fourth District, Div. One
By Matthew R. Owens
Withers Bergman LLP
Patrick, an active duty service member, named his wife, Alicja, as beneficiary of his $400,000 life insurance policy issued under a federal statute, the Servicemen’s Group Life Insurance Act. As part of their status-only dissolution judgment, Patrick and Alicja stipulated to an order requiring Patrick to maintain Alicja as beneficiary of the policy. Patrick later changed the policy’s beneficiary to his sister, Mary, who ultimately received the proceeds upon Patrick’s death. Mary requested an order granting her the policy proceeds because the federal statute preempted state law, including the stipulated order. The trial court granted the request, finding the federal statute gave Patrick the right to change the policy beneficiary at any time without notice to Alicja and that Patrick’s exercise of that right did not trigger the fraud exception to federal preemption.
The appellate court affirmed. Under the supremacy clause of the United States Constitution, state law is preempted to the extent it conflicts with a federal statute. The federal statute at issue here established an order of precedence for identifying policy beneficiaries and gave first priority to the person Patrick identified. The federal regulations implementing the statute allowed Patrick to change the named beneficiary at any time without the knowledge or consent of the previous beneficiary. Since Patrick had the right to change the beneficiary, his exercise of that right did not constitute fraud, nor did his failure to notify Alicja.
Filed June 1, 2017, First District, Div. TwoCite as A146330By Ciarán O'SullivanThe Law Office of Ciarán O'Sullivanwww.cosullivanlaw.com
78-year-old James Hilliard owned a controlling interest in the James Crystal Companies. In 2003 the Companies entered a security agreement with Wells Fargo Bank, and over time the Bank ultimately loaned the Companies approximately $18.9 million. The loan was in continuous default beginning in mid-2004, but the parties repeatedly amended the Agreement to allow Hilliard additional time to repay the loans. Although Hilliard made significant repayments on the Companies’ behalf, he failed to make the final payment because he could not liquidate certain assets by the deadline. The Bank then sold the debt to a third party, which obtained a $17 million judgment against the Companies. Hilliard sued the Bank for financial elder abuse, alleging that the Bank had always ignored prior deadlines, and he had no reason to believe that Bank would actually sell the loan. The trial court sustained the Bank’s demurrer on the grounds that Hilliard lacked standing to sue for the harm suffered by the Companies.
The Court of Appeal affirmed. Any alleged misrepresentations by the Bank were intended to induce action on the part of the Companies, not Hilliard personally. Hilliard would have an individual cause of action if the damages resulted from a special duty the Bank owed to him as a shareholder of the Companies. That was not the case here. Hilliard’s argument that the Bank breached a duty owed to him personally simply because he is an elder, and elder abuse is by definition a personal claim, is circular. Regardless of the fact that he is an elder, Hilliard’s claim originates from his status as a shareholder, and the claim for breach of duty belongs to theCompanies. EADACPA does not confer a claim for elder abuse in such circumstances.
Filed August 3, 2017, First District, Div. 5Cite as A148614
By Julie R. WoodsHartog, Baer & Hand, APCwww.hbh.law
K.W. was conserved under the Lanterman-Petris-Short Act as gravely disabled as the result of a mental disorder, unable to provide for his basic needs for food, clothing, or shelter, and incapable of accepting treatment voluntarily. When his conservator petitioned for reappointment, K.W. demanded a jury trial. The psychiatrist who diagnosed K.W.’s bipolar schizoaffective disorder testified as an expert that K.W. was gravely disabled. His testimony included his personal observations of K.W., medical records from the county health department and its locked facility where K.W. was receiving treatment, and conversations with K.W.’s former outpatient psychiatrist and social worker. The jury found K.W. was gravely disabled due to a mental disorder, and the court reestablished the conservatorship. K.W. appealed, contending the trial court erred in permitting the jury to consider hearsay testimony from an expert witness, and arguing the court should retroactively apply the new rule fromPeople v. Sanchez(2016) 63 Cal.4th 665.
The court of appeal affirmed. BeforeSanchez, when an expert’s opinion was based on hearsay, a jury received a limiting instruction to consider hearsay statements only to evaluate the expert’s opinion, but not as proof the information in the statements was true.Sanchezheld that out-of-court statements used as the basis of expert opinion testimony are hearsay. When an expert offers case-specific out-of-court statements to explain the bases for his or her opinion, those statements are necessarily considered by the jury for their truth, and are hearsay. Here, although the case-specific hearsay was problematic, other expert testimony was based on the witness’ own experiences, and the medical opinion of K.W.’s incapacity was unimpeached. The court found it was not reasonably probable that the jury would have reached a different result absent the improperly admitted hearsay testimony, and the error was harmless.
Filed April 19, 2017, Second District, Div. 7Cite as B269900
Belinda Wilkins Tepper sued her three siblings, Geoffrey Wilkins, Martha Wilkins, and Derek Wilkins, on behalf of her 88-year-old mother, Eileen Wilkins, claiming her siblings’ actions individually and as trustees of Eileen’s revocable living trust constituted financial elder abuse. Tepper was not a trustee of Eileen’s revocable trust. Tepper did not allege that she had been personally aggrieved by the actions of her siblings or that she possessed the ability to file suit as Eileen’s conservator or attorney-in-fact. Tepper’s siblings demurred to her first amended complaint, asserting Tepper lacked standing to pursue an action on Eileen’s behalf. Eileen retained her own counsel and intervened in the action, joining the demurrer to Tepper’s amended complaint. The trial court sustained the demurrer without leave to amend and dismissed Tepper’s elder abuse action on standing grounds.
The court of appeal affirmed. The trial court did not err in ruling Tepper lacked standing to bring the elder abuse action. Simply being an elder’s child is not sufficient to confer standing. Probate Code Section 48 defines an “interested person” as a child with an interest in a trust estate or estate of the decedent that may be affected by the proceeding. Tepper did not claim to have any interest in her mother’s revocable living trust, and even if she were named as a beneficiary, her interest would be merely potential and subject to change. Wilkins, not Tepper, was the real party in interest in the elder abuse action; Tepper was not aggrieved by the alleged conduct or otherwise beneficially interested in the controversy. Tepper did not proceed as her mother’s conservator or guardian ad litem, and therefore, she lacked standing to complain for financial elder abuse on her mother’s behalf.
Filed June 2, 2017, First District, Div. FourCite as A147236
By Ciarán O'SullivanThe Law Office of Ciarán O'Sullivanwww.cosullivanlaw.com
Fred and Martha Mahan created a revocable Children’s Trust and funded it with two second-to-die insurance policies on their lives, valued at a total of $1 million, and sufficient funds to pay the annual premiums well into the future. Two decades later, Fred, a lawyer at the end of his career, was in cognitive decline and Martha was diagnosed with Alzheimer’s disease. Taking advantage of the couple’s vulnerability, defendant insurance agents and brokers surrendered one policy and replaced the other with a single life policy requiring premium payments of $800,000, on which defendants earned $100,000 in commissions. To pay the increased premiums, the Mahans were forced to sell property and transfer additional money to the trust. The trial court sustained defendants’ demurrer to the Mahans’ financial elder abuse action on the grounds that the trust was not an elder who was protected by the Elder Abuse and Dependent Adult Civil Protection Act, and the Mahans voluntarily paid the premiums; defendants’ actions did not deprive the Mahans of property within the meaning of the Act.
The Court of Appeal reversed. Liability under the Act may flow from transfers made voluntarily. The fact that the Children’s Trust owned the policies did not negate the claim, because defendants’ actions deprived the Mahans of property rights in a number of ways. They made the Mahans’ estate plan more expensive and less valuable, caused them to lose value in their insurance policies, and forced them to spend more money to pay new premiums and defendants’ commissions. Furthermore, defendants’ actions were perpetrated by means of undue influence. Therefore, the Mahans’ complaint properly stated a cause of action for financial elder abuse.
Filed May 9, 2017, Second District, Div. 5Cite as B265865
After reporting complaints about her short-term memory to her doctor, Maria Higgins added her stepson, W. Clive Higgins, as joint account holder to her checking and savings accounts. Clive later transferred additional accounts of Maria’s into accounts owned by him and his wife, Lupe Higgins, in trust for Maria. When Clive died, Lupe changed the ownership of the accounts to her name alone. When Maria later died, Lupe paid Maria’s funeral expenses and the pecuniary bequests set forth in Maria’s estate plan from the accounts. Lupe also transferred some of the funds to her own family and used the remaining funds for her own purposes. Arthur Higgins, Maria’s executor and successor trustee of her trust, brought an action for constructive trust. The trial court found no constructive trust could be imposed for a wrongful act by Clive because once he was added to Maria’s account as a joint holder, he had a legal right to do as he pleased with the funds and could make Lupe a joint owner.
The trial court could find no legal obligation for Lupe to restore the funds and entered judgment in her favor.
The appellate court reversed, holding that Arthur had established all conditions necessary to impose a constructive trust. So long as all parties are living, an account belongs to the parties who have a present right to payment, in proportion to their contributions, unless there is clear and convincing evidence of a different intent. Clear and convincing evidence showed that Clive and Lupe intended to create irrevocable trust accounts in which Maria had a present beneficial interest in the funds on deposit, and that Lupe continued to hold the funds in trust for Maria after Clive’s death. One who wrongfully detains something, or who gains it by fraud, accident, mistake, undue influence, the violation of a trust, or other wrongful act, is an involuntary trustee of the thing for the benefit of the owner. Because Lupe repudiated the trust by removing Maria’s name from the accounts and using the funds for her own purposes, the court found that Arthur was entitled to a constructive trust as a matter of law.
Filed April 20, 2017, U.S. Court of Appeals, 9th Cir.Cite as 16-10152
By Catherine M. SwaffordWithers Bergman, LLPwww.withersworldwide.com
After being convicted of theft from an employee benefit plan, Michael Harris was sentenced to jail and ordered to pay $646,000 in restitution. Harris was the beneficiary of two irrevocable trusts. One of the trusts provided that the trustee shall pay income in the trustee’s absolute discretion for Harris’ support, and the other trust provided the trustee may distribute income and principal in the trustee’s absolute discretion for his support. The district court granted the government’s application for a writ of continuing garnishment for any property distributed from the trusts to Harris.
The Ninth Circuit affirmed. Present and future interests in trust distributions fall within the definition of property under federal law, and are subject to garnishment. Despite the trustee’s discretion with respect to both trusts, California law allows Harris to compel distributions from the trusts. Accordingly, a federal government lien may attach to Harris’ right to receive trust distributions. Further, disclaimers and spendthrift clauses do not prevent attachment of federal liens.
Filed April 4, 2017, U.S. Court of Appeals, 9th Cir.Cite as 14-17404
Michael Bensal and Bensal & Coburn Investments LLC (“BCI”) obtained two loans from Millennium Bank. The Small Business Administration (“SBA”) guaranteed one of the loans. BCI defaulted. Millennium assigned the loans to First Bank & Trust (“FBT”), which sued BCI and Bensal and obtained a judgment. FBT assigned its right to collect the judgment to SBA. Thereafter, Bensal’s father died. Bensal was class="anchor" named as a beneficiary of his father’s trust. Bensal disclaimed his interest in the trust. SBA filed a lawsuit in federal court seeking to void Bensal’s disclaimer under the Federal Debt Collection Procedures Act (“FDCPA”), arguing he fraudulently transferred his interest in the trust to prevent SBA from collecting the debt. The district court granted SBA’s motion for summary judgment, and ordered that Bensal’s interest in the trust be transferred to SBA to satisfy the judgment.
The Ninth Circuit affirmed. Bensal contended the disclaimer was effective under California Probate Code section 283, which provides that a disclaimer is not a voidable transfer. However, section 283 directly conflicts with, and is preempted by, the FDCPA. The disclaimer constituted a voidable transfer under the FDCPA because Bensal had an unqualified right to receive and dispose of his interest in the trust. In addition, the judgment assigned to SBA was a debt within the meaning of the FDCPA because SBA was a party to the underlying loan contracts.
Filed March 28, 2017 , Third DistrictCite as C077594
Melissa Reynoso served as trustee of her grandfather’s trust. The trust authorized Reynoso to sell real property to her mother, Karen Bartholomew, for $100,000 below the property’s appraised value. Reynoso agreed to help Bartholomew purchase the property. Reynoso obtained a personal loan, conveyed the property to Bartholomew, and the trust received the loan proceeds. Bartholomew’s son, Anthony Pizarro, and brother, Keith Jensen, filed petitions alleging that Reynoso breached her fiduciary duties, and that the sale must be set aside as a sham. During the litigation, Bartholomew turned against Reynoso and knowingly testified falsely. The trial court denied the petitions, finding the sale was valid and Reynoso did not breach her fiduciary duties. Additionally, exercising its equitable power over trusts, the trial court charged Bartholomew’s and Jensen’s shares of the trust with Reynoso’s attorney fees and costs. To the extent their trust shares were insufficient, the trial court held Bartholomew, Jenson, and Pizarro personally liable for the fees and costs.
The appellate court affirmed in part and reversed in part. Pizarro forfeited any arguments on appeal concerning the sale because his brief lacked clarity and failed to follow appellate procedure. The court properly exercised its equitable power to charge Reynoso’s attorney fees and costs against Bartholomew’s and Jensen’s trust shares. The court has the equitable power to charge a beneficiary’s share with the trustee’s attorney fees and costs if the beneficiary, in bad faith, brings an unfounded proceeding. While Bartholomew did not bring the petition, the court had the equitable power to charge her trust share because she took an unfounded position and acted in bad faith. However, the court could not order the litigants to personally pay the attorney fees and costs because such an order is beyond the court’s equitable power over trusts.
Filed March 23, 2017, Supreme Court of CaliforniaCite as S224985
Under his parents’ spendthrift trust, Reynolds is entitled to receive an initial distribution of $250,000 and periodic distributions from trust principal amounting to over one million dollars. Reynolds filed for Chapter 7 bankruptcy before receiving the trust’s first payment. The trustees sought a declaratory judgment on the extent of the bankruptcy trustee’s interest in the trust. The bankruptcy court held that the bankruptcy trustee could reach only up to 25 percent of Reynolds’s interest in the trust under Probate Code section 15306.5, and the bankruptcy appellate panel affirmed. The bankruptcy trustee appealed to the Ninth Circuit, which asked the California Supreme Court if Probate Code section 15306.5 limits a bankruptcy estate’s access to a spendthrift trust to 25 percent of the beneficiary’s interest, where the trust pays the beneficiary entirely out of principal.
The California Supreme Court held the Probate Code does not impose an absolute limit on a general creditor’s access to trust principal. A bankruptcy trustee, standing as a hypothetical judgment creditor, can reach a beneficiary’s interest in a trust that pays entirely out of principal in two ways under the section 15306.5 exception to spendthrift provisions. First, it may reach up to the full amount of any distributions of principal that are currently due and payable to the beneficiary, even though they are still in the trustee’s hands, unless the trust instrument specifies that those distributions are for the beneficiary’s support or education and the beneficiary needs those distributions for either purpose. Separately, the bankruptcy trustee can reach up to 25 percent of any anticipated payments made to, or for the benefit of, the beneficiary, reduced to the extent necessary by the support needs of the beneficiary and any dependents.
Filed March 21, 2017, First Appellate District, Div. ThreeCite as A144558
After their removal, former trustees Klein, Reynolds, and Pair sought to withhold documents relating to their two prior trust accountings on the basis of attorney-client privilege from successor trustee Fiduciary Trust International of California (FTI) and sole non-contingent trust beneficiary Hughes. FTI demanded the former trustees produce documents that included communications between the former trustees and their legal counsel. The probate court permitted the former trustees to withhold only 45 of the 234 documents identified in their supplemental privilege log, because FTI as successor trustee now held the attorney-client privilege. Both parties appealed. Both took issue with how the court distinguished confidential attorney-trustee communications concerning advice and guidance on matters of trust administration and those concerning matters on which the trustee seeks guidance out of concern for possible charges of breach of fiduciary duty.
The appellate court affirmed in part and reversed in part. The character of the relationship between the trustee and counsel determines whether the communication is privileged. To assert the attorney-client privilege as the basis for withholding documents from the successor trustee, the predecessor trustee must have hired a separate lawyer, paid for the advice out of its personal funds, and taken steps to preserve the confidentiality of the communication. The party claiming the privilege has the burden to establish the preliminary facts necessary to support its claims of privilege by distinguishing his own interests from those of the beneficiaries. Here, the former trustees did not make a prima facie showing the 45 withheld documents were privileged when they merely stated the documents concerned their defense of a petition for removal or surcharge. On remand, the trial court must reconsider the privilege status of the 45 documents.
Filed February 9, 2017; mod. 3/10/17, Second District, Div. TwoCite as B260762
Valerie Yale sued estate planning attorney Robert R. Bowne, II for malpractice. During her marriage to Bryan Knight, Yale removed her house from her trust and vested title in her class="anchor" name as separate property to obtain a line of credit. The lender required Yale and Knight to co-sign on the loan. This required that title to the house be conveyed from Yale as trustee of her separate trust to her as her separate property, then to her and Knight as community property. After the loan was recorded, Yale encountered problems in deeding the house back to herself, and Bowne completed the transfers as she wanted. When Yale subsequently had Bowne update her estate plan, she expressly instructed him to maintain her assets as her separate property. When she transferred property to her new trust, she read the words “community property” in two deeds, but did not ask Bowne about the effect of that term. Later, during divorce proceedings, Yale discovered her property might not have been restored as her separate property in her estate plan. In Yale’s legal malpractice action against Bowne, the trial court instructed the jury that it could find comparative fault on Yale’s part. The jury found Bowne was 90 percent negligent and Yale was 10 percent negligent. Yale appealed, contending the jury instruction on comparative fault was erroneous.
The appellate court affirmed. The facts and circumstances supported the trial court’s giving of the jury instruction. Comparative fault principles may apply in malpractice actions if the lawyer’s breach of duty causes damage to the client and if the client’s own deficient conduct results in sharing responsibility for the harm caused. Bowne breached the standard of care when he failed to follow Yale’s express instruction to maintain her assets as separate property. But Yale had sufficient knowledge to ask Bowne about the clauses in the deeds before she signed them and chose not to question Bowne. Because Yale contributed to the harm for which she sought damages, the trial court correctly instructed the jury on the principles of comparative fault.
Filed March 9, 2017, U.S. Court of Appeals, Ninth CircuitCite as 15-56034, 15-56047
Richard Zanowick sued defendants, alleging that their products exposed him to asbestos which led to his terminal mesothelioma. Richard’s wife, Joan Clark-Zanowick, also sued defendants for loss of consortium. Richard died, and Joan failed to file a timely motion to substitute a new party for Richard within 90 days as required by Rule 25(a)(1), Federal Rules of Civil Procedure. Joan moved to dismiss the action voluntarily without prejudice, or alternatively, to substitute a new party or extend the deadline. Defendants contended that Rule 25(a)(1) required dismissal with prejudice. The district court granted Joan’s motion to voluntarily dismiss the action without prejudice pursuant to Rule 41(a)(2). Defendants appealed.
The Court of Appeals affirmed. The panel held that Rule 25(a)(1) permitted the district court to allow a late substitution if requested, and did not require the district court to dismiss the federal action with prejudice. The district court did not abuse its discretion in granting the Rule 41(a)(2) motion for dismissal without prejudice.
Filed January 31, 2017, Second District, Div. SixCite as B265745
In 2008, William Morgan established an irrevocable subtrust for Beverly Morgan. William told Beverly about the subtrust at least twice in 2009. Thereafter, Beverly was unable to pay her mortgage. She decided to quitclaim her house to her sister, Connie Morgan. At the time, the house was worth less than the mortgage. In 2012, Connie sold the house for $48,000 less than the mortgage. The same year, Beverly contacted co-trustee Thomas Brooks for the first time to discuss the subtrust. Thomas and co-trustee Barton Clemens subsequently resigned. Successor trustee Joanne Williamson sued Thomas, Barton, Connie, and William for damages. Williamson alleged Thomas and Barton failed to keep Beverly informed about the subtrust, and had she been made aware of it, she would have used subtrust assets to prevent the loss of her home. The trial court denied the petition. The appellate court affirmed. Williamson failed to prove breach of fiduciary duty because she did not establish damages. Trustees may be held liable for losses incurred by a trust. They are not liable for personal damages suffered by beneficiaries, or opportunities lost for not distributing trust assets. Williamson failed to prove the subtrust was harmed and suffered damages. Moreover, Beverly was informed about the subtrust and had ample opportunity to obtain more information about it before she quitclaimed the house to Connie.
Filed December 29, 2016, California Supreme CourtCite as S226645
By Ciarán O'Sullivan The Law Office of Ciarán O'Sullivanwww.cosullivanlaw.com
The ACLU of Southern California submitted a Public Records Act (“PRA”) request for invoices sent to the County Counsel from outside law firms who defended excessive force actions by L.A. County Jail inmates, claiming that the invoices might prove that the law firms had engaged in “scorched-earth litigation tactics” that were against the public interest. When the County objected, the Superior Court required production of invoices from closed cases, but allowed the redaction of an attorney’s legal opinion, advice, mental impressions, or theories of the case, and ruled that all parts of an invoice in a pending case are privileged from disclosure. The Court of Appeal reversed, concluding that the entirety of a legal invoice, even from a closed case, is entirely privileged if it was confidentially transmitted within the course of the attorney-client relationship, regardless of the content.
The Supreme Court reversed, holding that the attorney-client privilege does not categorically shield everything in a billing invoice from PRA disclosure because the privilege does not apply to every single communication between an attorney and a client. The attorney-client privilege protects only communications made “for the purpose of legal consultation,” such as those containing legal opinion, advice, mental impressions, work product, or theories of the case. The amount of a legal invoice is not sent for the purpose of legal consultation but to ensure payment. In a pending case the mere amount of an invoice may reveal legally sensitive information such as an uptick in legal work, or preparation for trial, and thus the entire invoice in a pending matter is privileged. In a closed case, however, the mere amount of an invoice cannot reveal any legally sensitive information, and the amount billed for closed cases is therefore not privileged.
Filed October 24, 2016, First District, Div. OneCite as A145981
Dick Magney appointed his wife, Judith Magney, as his agent in a valid advance health care directive in 2011. The directive contained Dick’s health care instructions, expressed his personal values, and gave his agent the power to exercise her discretion to refuse medical treatment on his behalf. In 2015 he was hospitalized with a serious heart infection. After reviewing Dick’s medical history and recent tests, and consulting with Dick and Judith, his primary physician concluded that further treatment would be futile and would greatly diminish Dick’s quality of life. Upon investigation into possible caretaker abuse or neglect, Humboldt County Adult Protective Services filed an ex parte petition without notice to remove Judith as agent and to compel immediate medical treatment. The court granted the petition the same day. After she was served with the order, Judith filed a petition contesting the merits, seeking dismissal, and for statutory attorney fees. When Humboldt withdrew its petition, the court vacated the treatment order and denied Judith’s request for attorney fees.The court of appeal reversed and remanded to determine and award Judith’s attorney fees. Probate Code section 4771 allows for a discretionary award of attorney’s fees to the agent under a power of attorney for health care if the court determines that the proceeding was commenced without reasonable cause. Reasonable cause is determined under an objective, reasonable person standard, and the petition must be supported by competent evidence. Humboldt’s petition deliberately misled the trial court of the law and facts. Humboldt lacked reasonable cause to commence the proceeding: its allegations of neglect were unsubstantiated and its view of Dick’s best interests was inconsistent with his instructions and personal values expressed in his advance directive. The Health Care Decisions Law (Prob. Code sec. 4600, et seq.) protects the fundamental right of competent adults to control decisions concerning their own health care.
Filed April 15, 2016, Fourth District, Div. ThreeCite as G050964
Robert Obarr contracted to sell a mobile home park to S.C.D. Enterprises, who assigned the purchase agreement to Westminster. After escrow opened, Obarr contracted to sell the mobile home park to Pham. Westminster and Pham filed actions against Obarr, who died during the litigation. After Obarr's death, Pham filed the declaration of Obarr's bookkeeper describing Obarr’s retention of attorney Kimes, and attaching an e-mail and letter to Obarr from Kimes. The special administrator sought orders to exclude this evidence on the ground it was protected by the attorney-client privilege, and to disqualify Pham’s counsel for improperly obtaining and using the privileged documents. The trial court conducted an in camera review of the evidence and determined the attorney-client privilege did not apply because statements by Obarr's attorney in the communications indicated he did not represent Obarr, and the statutory exceptions provided in Evidence Code sections 957, 960, and 961 applied. The special administrator appealed.
The appellate court reversed. The court cannot review the contents of communications to determine whether the attorney-client privilege applies. The privilege attaches to all confidential communications between an attorney and client. When the proponent makes a prima facie showing of a confidential attorney-client communication, the court must presume the communication is privileged, and the burden shifts to the opponent to establish waiver, an exception, or some other reason the privilege does not apply. The special administrator made a prima facie showing of a confidential attorney-client communication, which was not rebutted. Section 957 is based on the assumption a decedent would want the privileged communication disclosed to ensure his intent is carried out. Section 957 did not apply here because the parties made claims against, not through, Obarr. The purpose of sections 960 and 961 is to permit an attorney to testify about a client’s intent regarding an instrument affecting an interest in property. There was no showing the disputed evidence consisted of the type of communications about which an attesting witness would testify. The appellate court remanded the case to determine if Pham’s counsel should be disqualified.
Filed December 16, 2016, Second District, Div. SixCite as B270310
Appellant B.C. suffered cardiac arrest and brain damage from the combined effects of methamphetamine and alcohol usage, resulting in physical and mental deficits. B.C. later married Jessie M., with whom she had previously abused drugs and had a daughter. A neuropsychologist determined that B.C.’s cognitive deficits made her vulnerable to fraud. When B.C.’s aunt C.S. petitioned for appointment as probate conservator of B.C.’s person, B.C. and Jessie hired a private attorney to oppose the petition, and that attorney demanded a jury trial. Because of B.C.’s lack of capacity to hire a lawyer, the Court appointed instead a public defender who did not renew the demand for a jury trial. After a bench trial, the court appointed C.S. as conservator of B.C.’s person.
The court of appeal affirmed. Prior cases held that the trial court must obtain the personal waiver of a jury trial from the conservatee in conservatorship proceedings under the Lanterman-Petris-Short Act. Similarly, a personal waiver is required in cases involving the involuntary commitment of a mentally disordered offender. But, those situations are distinguishable because a probate conservator has no power to place a conservatee in a locked facility against her will. While the Probate Code allows a jury trial in conservatorship cases, it does not mandate one in every case where it is not affirmatively waived, which is the rule in involuntary commitment situations. The trial court here erred when it failed to advise B.C. of her right to a jury trial, but the error was harmless because she was represented by counsel who had authority to forego a jury trial. Similarly, B.C’s argument that the court did not consult her about the conservatorship failed because her sentiments were represented to the Court by her attorney.